European mills see differing profits from carbon credit sales

In the current period of the European Emissions Trading System, steelmakers have been left with a surplus of carbon credits. This surplus may be reversed as restrictions on emissions become more stringent from next year onwards but for now these credits are a tempting way to bolster ailing balance sheets. However, the key to getting the most out of these credits is a proper strategy and some steelmakers are achieving almost double the return per credit as others, as this story from Platts Steel Business Briefing’s Daily Briefing shows.

SBB 19 March – SSAB sells surplus carbon credits as emissions fall

Sweden-based steel producer SSAB saw greenhouse gas emissions at its European plants decline in line with production last year to 5.5m tonnes of carbon dioxide. The company also took the opportunity to bolster its balance sheet by selling 4.1m surplus carbon credits.

SSAB earned SEK 275m ($40.47m) from the sale of carbon credits last year. This would suggest it earned just $9.87 for each of the credits.

The company sold most of the credits towards the end of the year when SSAB’s blast furnaces were running at low utilisation levels, a SSAB spokesperson says. Carbon credit prices fell sharply in Q4, Platts SBB notes.

ArcelorMittal earned an average of $18.6 per credit last year, indicating a more sustained sale of credits through the year, analysts suggest.

As part of the European Emissions Trading System (ETS), steelworks must report their greenhouse gas emissions and hand over one carbon credit for each tonne of carbon dioxide equivalent emitted. In the current trading period (2008-2012) steelmakers have been given sufficient carbon credits to cover their emissions. In fact they have received more than they have so far used as the allocation was calculated before the 2008 financial crisis and so actual emissions have been lower than previously expected.

SSAB was granted 36.7m credits for 2008-2012 and now has 7.5m remaining to cover emissions this year. SSAB could therefore have more credits to sell unless it increases its European steel production by around 36%. Platts SBB calculates.